Having joined the firm in the late 1970s as a corporate banker, he has watched Brown Shipley undergo a transformation over the years from a merchant bank into a full service private bank and wealth manager.
‘I started at Brown Shipley in 1977, when it was what you would know at the time as a merchant bank and part of the accepting houses – so the days when the odd bowler hat did still wander around the City. We were far more of a commercial trade bank with private banking as part of the service offering,’ Smoker recalls.
The transition gathered pace from 1992 after Brown Shipley was acquired by European bank KBL and undertook a series of acquisitions, including stockbroker Cawood Smithie, private client investment manager Henry Cooke and pensions and investment manager Fairmount Group.
Over the period, Smoker progressed within the management structure, including a stint as head of corporate banking and credit, before taking on executive responsibility for risk and compliance in 2001.
Last July saw the purchase of Brown Shipley’s parent group, KBL European Banks, by Precision Capital, a Qatari-backed firm based in Luxembourg.
KBL was formerly owned by KBC Group. Smoker says following a review of the business he was given an opportunity to move back to the front office to help spearhead what the company hopes will prove a new growth era.
As head of the London front office, he now oversees the investment management, banking, financial planning and pensions teams.
‘We had a series of reviews and management changes towards the end of last year, with the result being an opportunity to come back to the front office and a return from the dark side. We put some effort into the growth of the London office, where we see tremendous potential for 2013 and beyond,’ he explains.
He acknowledges the review was not a painless exercise, notably marked by a reduction in headcount and changes to the board late last year. However, this was seen as a necessary step to position the bank for future growth.
‘It was part of a process of looking at the business and how we wanted to structure and position it moving into 2013 and beyond,’ Smoker adds.
The management team views London as an area offering significant growth opportunities, given its strength as a financial centre and the growing number of resident non-domiciled clients seeking wealth management and advice.
Brown Shipley has built a team specialising in dealing with South Asian clients, another area Smoker oversees. He says the firm’s heritage (which dates back to 1800) can be a real draw for this type of clients, and it has seen a steady flow from larger banks across its offices since the financial crisis.
Alongside the bank’s core clientele of professionals and businesspeople, it is also keen to increase the number from the areas of sports and media.
With this in mind, Brown Shipley is targeting one-year asset growth of £100 million in London, pushing for 10%-15% growth over the next three years. It had £3.1 billion under management at the end of 2012, up from £2.9 billion in 2011.
Over 2012, the business posted an annual income of £38 million.
While Brown Shipley has hubs in London, Birmingham, Edinburgh, Manchester and Leeds, Smoker says the bank would not rule out further acquisitions in order to gain a presence in other areas of the UK, such as Exeter and Bristol in the South West.
‘With the wealth management market, it tends to be who is available and what the targets and opportunities are that come up. I don’t think we would be in a position to go in as a start-up in those areas unless there was a good case to do it,’ he adds.
‘Perhaps if we had identified a team from a competitor who were unhappy and wanted to move. Otherwise, we want to make sure if we go into an area we can get to critical mass fairly quickly.’
Following the takeover of KBC by Precision Capital, Smoker said there could be increased co-ordination to establish a more international offering among KBL’s European subsidiaries to cater for a growing international client base. He adds the historic Brown Shipley name is likely to remain in some form.
‘There is a general recognition that the name is valuable and we want to use it.’
The London head says the bank is on the lookout for private bankers and investment managers with sizeable books who can fit culturally.
Having enjoyed a 35-year career and witnessed a raft of changes at Brown Shipley, Smoker expects the pace of change to only accelerate but hopes the bank will retain its rich heritage and values.
‘The pace of change is just getting faster and I think the skill is to be prepared to change and go with it but not lose sight of your traditional values,’ he says.
He says it was fascinating to have worked on the compliance side of the business in the years after the introduction of the single regulator under the Financial Services Authority and the period that followed the credit crisis. Although this has been marked by an avalanche of regulatory changes, he says thankfully this has not had a big impact on Brown Shipley.
‘The financial industry has had to cope with a lot of change in a rapid period of time, but I think we have always had a relatively straightforward business. Therefore, while there were a number of changes, these weren’t significant in terms of our business,’ he says.
‘Looking at the retail distribution review (RDR), there have been relatively minor changes in terms and conditions, [and] the way we deal with intermediaries in terms of their commission payments.’
While the suitability review has led many firms to overhaul their processes and systems, Smoker says it is an area the bank was already looking at before the regulator highlighted it as an industry-wide issue in 2010/11.
‘We have reviewed and revised all our front-facing client documentation from the point of view of a new client brochure that sets out our investment mandate,’ he explains.
‘For example, it explains what concepts such as attitude to risk alongside risk-reward equations mean. The client out there ranges from very sophisticated, in terms of what they know, to people relying entirely on us to do what they want from an investment management point of view.
‘You still have to explain what you are doing and how you are doing it. If you put two investors down at either end of those scales, you need the right tools to explain what you are doing. Some want more explanation and some want a lot less, so it is about making sure you have got it right.
‘Then it is [about] keeping the information you have taken up-to-date on a regular basis and making sure what you are doing for the client is suitable. [In] the discussions we have had with the FSA in terms of our regular meetings, they seem to be happy with our approach and what we are doing.’
Brown Shipley offers five different risk-rated investment mandates, with differing allocations to equities, fixed income, alternatives and cash. The investment policy committee, which comprises CIO Peter Botham and investment managers from across the business, sets the allocation levels for each mandate with recommended buy lists produced for each of these allocations.
It is then up to individual investment managers to build bespoke portfolios for their clients within these ranges. If clients want something specific, the firm can devise a policy statement and run the mandate outside the normal parameters.
The team is currently backing stocks with defensive earnings and dividend growth potential, and remains positive on Japanese equities despite recent volatility. In the challenging area of fixed income, they are avoiding government bond markets, in favour of corporate debt with low duration.
The calls have contributed to the outperformance of the Brown Shipley Income model portfolio, which the group says is indicative of a typical medium risk mandate, with a 22% return since the model was launched in July 2011 versus a 13.6% rise by the IMA Mixed Investment 40%-85% shares sector.
Brown Shipley also offers clients private banking services, including lending against their portfolios and bridging loans, together with financial planning. Smoker believes this leaves the business well positioned compared to the competition.
‘There aren’t too many wealth managers out there with banking licences. The competition is Rathbones and the major banks. We clearly are able to provide a banking package focused on investment management; we also have wealth planners in the business. It is a pretty holistic offering once you have identified what it is the client needs and why they have come to you in the first place,’ he says.
The bank has a £500,000 minimum investment level, although there are legacy clients below this, and around 80% of clients are in discretionary mandates.
With the advent of the RDR in January this year, Smoker says the main impact on the business has been to change the way it pays referral fees to introducers.
The bank is also aiming to move all unit holdings over to clean share classes by the end
‘For us, we felt it was relatively straightforward because we have got a relatively straightforward business. It has meant changes in the way we deal with intermediaries, facilitating adviser charging. Personally I think [the RDR] is a good thing,’ he says.
‘It is transparent: the client knows what the intermediary or adviser they are using is going to charge them. It is much clearer from our point of view in terms of what the client is paying for the service. If that is all set out, it is clearer and easier for the client all around. I think we can embrace what has come from the RDR.’